Average is not good enough … Our goal at Family Investment Center is excellence. We find excellent investment products and supervise an excellent service package. We maintain a library of excellent research materials and financial planning resources. We also demand top safety and security for our clients.
We won’t settle for average. We continually seek top managers or securities and meld them into superior custom portfolios. Each palette of investments is carefully tailored to personal or family goals. We enlist excellent managers, research, resources, and effort for our clients. Don’t settle for average. You deserve excellence.
Please search our blog posts for answers to common investment questions, and we look forward to sharing our knowledge and experience with you first-hand.
Do You Know What to Look for in Portfolio Management Fees?
The Beatles said in their hit song, “Money,” that the “best things in life are free,” and they definitely have a point. However, when it comes to managing your money, paying fees to a portfolio management professional can help that money grow, and it’s certainly worth it.
However, due to industry complexities and varying degrees of customer “service,” investment management fees can often be obscure. This can lead to mistrust and poor decisions on behalf of the investors. While the most trustworthy investment advisors use fee structures that are completely transparent, following the tips in a “fee triangle” can assist you in understanding exactly what you’re paying for.
Don't be the victim of unfair or elevated pricing schemes. You can avoid this by shining the light in the right places.
The first layer of fees is often tied to local investment management fees. This is usually a percentage of the portfolio size, AKA assets under management or AUM. Your investment advisor, broker, bank, or trust company or department will charge this first layer of fees.
Portfolio manager fees are the second layer, and although they’re the most common, they’re often less obvious. These are fees that the underlying managers of the mutual funds, hedge funds, exchange traded funds, unit trusts, REITs and other managed products charge to manage the fund. It’s how the manager of the underlying investment is paid. Although it’s difficult to rid your portfolio of these altogether (unless you buy only individual stocks), your advisor should aim to find investments that minimize your expenses while maximizing your investment potential.
Transaction fees are the most insidious of all these fees, which are often hidden from you in trades. For instance, if you buy a thousand shares of stock, a trade fee or commission may be paid on that trade, which should be reported on a trade confirmation. However, you may not see it if your custodian reports the trade at “net” prices. Even scarier is that there is often a huge disparity among the level of transaction fees that are charged to clients.
Not all investment portfolios will include all three fees. Some might only have one or two. A stockbroker might have a recommendation for you, and if you follow through on that, they will take their payment through a commission. If a mutual fund is recommended, there could be a sales commission involved, as well as ongoing portfolio manager fees, which means you could be getting hit with all three layers of fees.
Remember - it’s the total fees that matter to performance, not the particular fee scheme. Investment performance should be tied to broad market averages, not individual stocks and bonds. There are too many instances out there today where investors are getting hammered by layered fees, most often in the hidden fees.
At Family Investment Center, we remain totally transparent about our fee structure and communicate it clearly. We never take a commission – the only way we get paid is through a percentage of assets under management. That way, there’s a direct incentive for us to keep clients’ expenses low and their balances growing over time. We follow core investment principles and practices that go above and beyond the definition of a fiduciary. Contact us today and let’s discuss how we approach portfolio management differently.
Why Fiduciaries are Looking Out for Your Investments … and Your Future
Money. It’s a lot of things, but most importantly, it’s a tool. When it comes to investments, money is a tool that helps people reach their goals. Maybe that goal is to have freedom in retirement, or to go to school, or to travel. Perhaps money is the tool that assists a family legacy. Regardless of the goal, making smart investment decisions can leverage your tools and make those goals a reality.
The investment process can be made difficult by the massive volume of information available today through sources that include television, books, magazines and the Internet. Sorting through all of it can lead to confusion andpoor decision making that can have a negative impact on investments and end goals, which is why it truly pays to have an expert on your side in the form of a fiduciary.
A good investment advisor will explain these complexities in layers, presenting the easiest-to-absorb information first. Some investors are more comfortable taking a hands-off approach and letting their advisor take control. Others have a more vested interest and want to drill down on specifics, which often require a custom dashboard that simplifies the important and complex points.
Dan Danford, CEO of Family Investment Center, is often quoted as saying his firm can provide as much depth as a client wants.
“I’m glad to answer questions and provide detail,” Danford said. “However, just because we follow all the details doesn’t mean clients need or want all that information to get to their goals. We tailor our conversations toward each individual’s preferences. A fiduciary can follow a client’s path through life; looking out for their best interests and helping them achieve their goals along the way.”
For an investment advisor operating as a fiduciary, these end goals might include establishing a fund for a child’s college account, for example. Ultimately, the child graduates from college utilizing that fund, and go on to establish a career and perhaps even begins to save for their own child’s college fund.
Danford says investment advisors feel a special kind of attachment when their client reaches their goals. The relationship that a good investment advisory team forms with a client and their family can span for years – and is often marked by life events and milestones along the journey.
“There is a wonderful sense of friendship and camaraderie among our team and the clients we help,” he says. “In that regard, our clients’ stories, their phone calls, or visits to our office remind us that we are creating brighter futures for families each day.”
Additionally, Danford seeks to remind investors that fiduciaries offer their services based on fees only - not commissions. This allows them to truly focus on the outcomes of the client’s portfolio, rather than their own benefit. This is especially important today when pending national industry changes mean many firms will say they are client-focused - but may not have true experience in this area. (Note: A 2015 report from the White House and Department of Labor indicates investors lose roughly $17 billion a year due to brokers offering conflicted advice. Read more about the report here.)
At Family Investment Center, we have always operated as a fiduciary and always in a commission-free, jargon-free and client-focused setting. Schedule a meeting with us today.
Focusing on Investment Strategies
Feel like it’s too late to start on your investment future? Think again. There’s no hard and fast rule set on exactly when to start or build up your investment strategies. Although getting an earlier start reaps better results over the long term, it’s not too late to start.
Do you need to move past a feeling of intimidation? Compare it to this analogy: do you need to know how to build a car in order to drive it? To combat intimidation, remember there is nothing wrong with taking interest in how investments work, but you can leave the expertise to your investment advisor, a person who has the experience and knowledge to help you develop a goal-focused and personalized investment strategy.
Smart investment strategies are those that work for you personally, not for your friends, family, and associates. Unfortunately, too many investors get caught up in the advice they get from these individuals, all of whom are well meaning, but want to pass off investment advice that worked for them. It’s okay to listen and learn, but don’t be swayed by strategies meant for a person in a completely different situation.
Many decisions are based on emotion, but investment decisions based on emotion can be financially detrimental. Additionally, when you bring other peoples’ emotions into the equation, it quickly can turn into a poor decision for your financial future. Reacting to these heightened emotional situations usually results in actions that can negatively affect your finances. Instead, consider maintaining a calm, “big-picture” focus.
According to Dan Danford, CEO of Family Investment Center, there are some rules to follow regarding investment strategies that will help you fight drama and stick to a long-term plan (of course, these can vary person-to-person, so be sure to speak with an advisor regarding specifics):
· Don’t quickly respond financially to political or economic news
· Use payroll deductions for savings and retirement accounts
· Use mutual funds or exchange-traded funds (ETFs)
· Gauge performance at five-year (or longer) intervals
· Benchmark at broad market averages
· Performance only matters in reference to similar investments
· Increase your savings amount every year
In conclusion, Danford said one of the biggest flaws he sees with do-it-yourself investing is that people don’t set aside enough time for personal finance issues.
“Reading The Wall Street Journal once a week or visiting for five minutes on the phone with your broker isn’t enough,” he says. “If you want to do it right, dedicate one full evening a week or a few hours each weekend. If you can’t do that, then you need professional help.”
Professional advice is good idea for any investment strategy. Find a good fiduciary advisor, like those at Family Investment Center, who can listen to your ideas and concerns and help you move toward a clear plan in a commission-free environment. (In fact, this is our sole focus, every day.) Come find out why we’re a little bit different when it comes to investments … and why our clients like it that way.
Investment Advice for the Middle Class
If you are like most middle class investors, it may seem as if there are a million things that separate you from millionaires. In reality, the way the middle class and the wealthy handle investments can be quite similar; investment advice can be founded on the same principles – and the same misperceptions.
One misperception about wealthy investors is that they are geniuses when it comes to the stock market. Some investors believe they “play” the market every day and take great risks, but enjoy massive rewards. Typically, this isn’t true on many levels. Most experts agree, not many successful investors “play” the stock market. Instead, they focus on consistency over time and planned risk. Additionally, less than one percent of millionaires make daily trades on the market. Instead, they’re likely doing what you might consider for your own investments – thinking long-term and owning a variety of investments for the purpose of diversification.
In fact, the heart of wealth management science, according to Dan Danford, CEO of Family Investment Center, “is the idea of a thoughtful long-term diversification. This scientific basis for portfolio theory won a 1990 Nobel Prize in Economics.” Danford explains that, in essence, an investor’s risk is reduced and performance of investments is enhanced when investors own a wide variety of investments.
If you’re getting investment advice from friends, family, or colleagues telling you that you should put your money in government bonds and bank deposits, this may not align with the strategies of professionals who work with both the wealthy and the middle class. Putting your money in these “safe” places offers low interest rates, but if you consider inflation and taxes, your investment there is nothing more than a shelter where compound interest doesn’t stand a chance.
Wealthy investors seem to understand the difference between price and value. Dr. Tom Stanley’s book titled The Millionaire Mind brings up an issue that many investors fall victim to: they don’t make enough distinctions between price and value. Millionaires tend to look at investment products through the lens of a long-term situation. For instance, Stanley offers up the analogy that they’re purchasing their furniture and shoes based on the lifetime cost of ownership. Are they buying better quality products? Yes. But they last longer than the cheap stuff. When you put yourself in that mindset for your investments, you’re on the right path.
Finally, if you’re a DIYer when it comes to your investments, rethink what your efforts are actually getting you. You might spend hours studying various investments, shopping around to find something that is only marginally better than the previous product you researched. Let an investment advisor who has experience working with a variety of investments help guide you with your investing strategy.
At Family Investment Center, we believe in practical, jargon-free and client-focused service – and always within a commission-free environment. Contact us today to learn more.
How Will 401(k) Investing Change in the New Year?
The 401(k) plan is among the strongest investment tools for many working Americans, especially those whose employer does not offer a pension plan, but will match contributions (up to a specific percent) to the company-sponsored 401(k). When you invest in a 401(k), which utilizes the stock market and other products, you are investing for your future. It’s important to stay informed of the rules that govern your 401(k) investing as they change each year.
The IRS limits your 401(k) contribution and those limits are subject to change annually. The company you work for also limits how much they match on the amount you contribute. The current IRS limit on employee elective deferrals is $18,000. This will continue into 2017, but keep your eyes on 2018 as that deferral amount could go up.
For those of you who are 50 or over, you can make what the IRS refers to as “catch-up” contributions, which allow you to put an extra $6,000 a year into your traditional and safe harbor 401(k) investing plans, or $3,000 extra into your SIMPLE 401(k) plan. When the IRS makes changes to these catch-up contribution limits, it’s generally tied to a cost-of-living adjustment.
Another change impacting a number of people relates to 2017 IRA income limits. Employees who have a 401(k) account through their work can make tax-deductible contributions to a traditional IRA. For example, employees earning up to $62,000 a year are allowed to deduct from income tax IRA contributions of up to $5,500. Unfortunately, if you earn between $62,000 and $72,000 (in 2017), that phases out.
Workers making less than $118,000 can make Roth IRA contributions in 2017, which allows for tax-free withdrawals in retirement. Roth contribution limits phase out for those making $118,000 to $133,000 (in 2017).
It can be challenging to keep tabs on all the rules, regulations, perks, and privileges available to you in your retirement plan investing. This is why it is important to include a professional advisor to keep you informed on the decisions that impact your investments. At Family Investment Center, we’re ready to assist you in these important decisions and more. Contact us today and see why our commission-free environment remains the investment “home” of so many families and individuals.